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Background
On November 10, 2025, the Chairman of the U.S. Senate Committee on Agriculture, Nutrition, & Forestry ("Senate Agriculture Committee"), John Boozman (R-AR), and committee member Cory Booker (D-NJ) released a draft of digital asset market structure legislation (the "Senate Ag Discussion Draft"). This legislation would provide new authority to the Commodity Futures Trading Commission (the "CFTC") to regulate activity involving "digital commodities." This bipartisan proposal expands directly upon the CLARITY Act approved by the House of Representatives in July, which we discussed here and would likely be joined up with the Senate Banking Discussion Draft, referred to below
The CLARITY Act, a product of the U.S. House Committee on Financial Services and House Committee on Agriculture, proposed a holistic digital assets regulatory framework, intended to cover both the relevant securities law and commodities law frameworks, while also addressing other related issues. As such, it sought to clarify the role of the Securities and Exchange Commission ("SEC") and the extent of application of securities law to a digital assets framework. It also would have established the CFTC as the regulatory authority over new registrant categories of digital commodity exchanges, digital commodity brokers, and digital commodity dealers.
Subsequent to the House's passage of the CLARITY Act, the U.S. Senate Committee on Banking, Housing, and Urban Affairs ("Senate Banking Committee") and the Senate Agriculture Committee have both examined the bill. The Senate Banking Committee released two discussion drafts, most recently on September 5, 2025 ("Senate Banking Discussion Draft"). The Senate Banking Discussion Draft revised, modified, and expanded on those portions of the CLARITY Act focusing on the role of the SEC and the extent of application of securities and banking law to a digital assets framework. The Senate Ag Discussion Draft hews more closely to the framework for commodities regulation found in the CLARITY Act.
Executive Summary
Overall, the Senate Ag Discussion Draft represents a more cautious and prescriptive approach to digital commodity regulation compared to the CLARITY Act's approach. While maintaining the House bill's core framework of CFTC oversight over digital commodity exchanges, brokers, and dealers, the Discussion Draft tightens key exemptions, imposes stricter proprietary trading prohibitions, mandates more detailed conflict of interest rules, and enhances customer protections. The Discussion Draft also removes the CLARITY Act's DeFi provisions and limitations on CFTC exemptive authority, signaling that significant issues remain unresolved as the legislative process continues.
Senate Ag Discussion Draft
The Senate Ag Discussion Draft focuses exclusively on the CFTC-related portions of the CLARITY Act, namely much of Title I and nearly all of Title IV. Under the framework set out in the Senate Ag Discussion Draft, three new categories of CFTC registrants would be created: digital commodity exchange, digital commodity broker, and digital commodity dealer.
With the critical caveat that the bipartisan group developing the Senate Ag Discussion Draft could not reach agreement on how to approach activity that involved "decentralized finance" ("DeFi") (one of the most central issues in any effective digital asset market structure legislation), the changes made from the related provisions in the CLARITY Act, while numerous, are relatively technical, rather than substantive, in nature. Therefore, we select the most significant for attention here.
Key Differences Between the CLARITY Act's Commodities Provisions and the Senate Ag Discussion Draft
Definitional Refinements with Heightened Restrictions
The Senate Ag Discussion Draft introduces several definitional changes that generally narrow the scope of certain exemptions. Most notably, the definition of "Blockchain Application" now requires that such applications be open source. Similarly, the definition of "Decentralized Finance Trading Protocol" has been tightened — whereas the CLARITY Act provided a broader exclusion for blockchain protocols and public software or code, the exclusion now applies only to software or code that is both public and open source.
The Senate Ag Discussion Draft also expands the definition of "Digital Commodity" in notable ways. It explicitly includes digital assets whose "primary branding, narrative, or price discovery is substantially derived from a meme, joke, trend, or name or likeness of a public figure" — a provision notably absent from the CLARITY Act that appears designed to bring so-called "meme coins" squarely within the regulatory framework. Additionally, the collectibles exclusion has been modified to exclude from the definition of "collectible" any asset whose issuance, replication, or distribution permits "market-scale trading among unaffiliated persons" (a concept the CFTC will define by rule). This is likely targeted at the "one of 10,000" NFT collections that proliferated around 2021–22
The Senate Ag Discussion Draft introduces a new defined term, "Digital Commodity Custodian," which does not appear in the CLARITY Act. This term is significant because entities must first qualify as Digital Commodity Custodians — persons who, as a regular business, hold, maintain, or safeguard digital commodities for others — before they can be deemed Qualified Digital Commodity Custodians. Relatedly, modifications to the "Qualified Digital Commodity Custodian" definition include expanded permissible supervision standards (adding state credit union regulators) and revised capital requirements now focused on sufficiency to "conduct an orderly winddown and resolution" rather than merely "financial integrity."
Proprietary Trading Prohibition and Enhanced Conflicts Standards
Perhaps the most significant substantive change concerns proprietary trading by digital commodity exchanges. The CLARITY Act prohibited exchanges and their affiliates from trading for their own account but provided exemptions for trading: (1) at a customer's direction, (2) for risk management, (3) for operational needs, and (4) for functional use of a blockchain system. The Senate Ag Discussion Draft eliminates all these four exemptions in favor of establishing an absolute prohibition on proprietary trading. The corresponding rulemaking provisions regarding affiliated trading have been removed, presumably because the activity is now entirely prohibited. If implemented as adopted, this could significantly impact the business models of many established digital asset exchanges and the inclusion of this provision in the discussion draft may presage significant lobbying from the major exchanges.
Throughout the Senate Ag Discussion Draft, conflict of interest requirements have been made substantially more prescriptive. Rather than allowing registrants discretion in establishing compliance mechanisms, the Senate Ag Discussion Draft mandates specific CFTC rulemakings on conflicts of interest for digital commodity exchanges, brokers, and dealers, with detailed requirements specified in the statutory text. The inevitable delay resulting from the rulemaking process may discourage new market entrants from starting to build out platforms until the full scope of these conflict of interest requirements can be better understood.
"Readily Susceptible to Manipulation" Standard
The Senate Ag Discussion Draft replaces the CLARITY Act's requirement that digital commodity exchanges establish policies and procedures for trading digital commodities only when various prerequisites are met with a simpler, though potentially more subjective, standard: a digital commodity must not be "readily susceptible to manipulation" to be traded on a digital commodity exchange. This same standard is newly imposed on digital commodity brokers and dealers (a requirement absent from the CLARITY Act) limiting them to trading only in digital commodities "not readily susceptible to manipulation." While perhaps laudable in concept, the diverse ways in which many digital assets are directly and indirectly traded (i.e., through on- and off-shore centralized exchanges, decentralized exchanges and numerous derivatives platforms, including platforms that facilitate the creation of "perpetual futures" with respect to almost any digital asset) may make implementation of this standard for many digital assets very challenging for digital commodities exchanges.
Decentralized Finance Provisions Removed
The entire Section 409 of the CLARITY Act regarding decentralized finance has been removed from the Senate Ag Discussion Draft and replaced with a placeholder stating "Seeking further feedback." This represents a significant gap, as the DeFi provisions were among the CLARITY Act's most novel and contentious elements. An inability to reach a compromise position on DeFi is the single most likely reason that this legislative initiative could stall out in this Congress. We will be following these developments closely.
Enhanced Customer Protections and Compliance Requirements
The Senate Ag Discussion Draft strengthens the CLARITY Act's customer protection provisions in several respects. The definition of "customer property" for Bankruptcy Code purposes has been expanded. The CFTC is now required to promulgate rules regarding treatment of customer assets specifically in insolvency or liquidation proceedings when digital commodities are used for blockchain services. A new Section 209 augments the CFTC's customer property rules generally, providing a comprehensive framework for treatment of customer property in bankruptcy scenarios. The insolvency and subsequent resolution of customer claims for digital asset trading platforms that also custody customer assets has been a major area of concern for market participants, particularly since the collapse of FTX in 2022. Thoughtful rulemaking in this area could provide confidence to retail and institutional traders and benefit the entire market.
Chief compliance officers for digital commodity exchanges, brokers, and dealers must now be solely dedicated to that registrant and may not serve affiliates — a requirement not present in the CLARITY Act. Additionally, financial resource requirements for exchanges have been tightened; they cannot be satisfied using digital commodities originated by the exchange or its affiliates — a clear shot at FTX and other centralized exchanges that are perceived to have bootstrapped liquidity through self-issued tokens.
Removal of CFTC Exemptive Authority
The Senate Ag Discussion Draft systematically removes or limits the CFTC's exemptive authority in multiple contexts. The CFTC's authority to exempt persons from the definitions of "Digital Commodity Broker" and "Digital Commodity Dealer" is now limited to eligible contract participants only. Explicit exemptive authority has been removed from the "Qualified Digital Commodity Custodian" provisions and from provisions governing digital commodity exchanges, including the authority to recognize foreign exchanges. The Senate Ag Discussion Draft removes the CLARITY Act's explicit interim exemptive authority, potentially limiting the CFTC's flexibility during implementation. Some of these changes may be viewed as setting up points of negotiation when the inevitable "horse trading" on the final language of the market structure legislations commences.
New Institutional Provisions
The Senate Ag Discussion Draft adds several new provisions absent from the CLARITY Act. Section 106 requires consultation with foreign regulatory authorities and provides authority for information-sharing agreements. Most significantly, Section 211 establishes a new "Office of the Spot or Cash Market Digital Commodity Retail Advocate" within the CFTC, including an associated ombudsman to act as intermediary between retail customers and the CFTC or registered entities. Section 212 requires the CFTC to examine the racial, ethnic, and gender demographics of customers participating in digital commodity markets.
Expanded Timelines and Procedural Modifications
The Senate Ag Discussion Draft extends key timelines beyond those in the CLARITY Act. Rulemaking deadlines have been extended from 360 days to 18 months. For trading certification and approval, day counts for certification effectiveness have changed from 20 business days to 30 days, and for previously certified digital commodities, from 1 business day to 15 business days. The effective date is now the later of 18 months after enactment or 120 days after final rulemakings (compared to 270 days after enactment in the CLARITY Act's Title IV)..
Other Notable Changes
State and local authority for fraud, deceit, or unfair or deceptive acts and practices has been explicitly retained in federal preemption provisions for digital commodity exchanges, digital commodity brokers, and digital commodity dealers. The CFTC's inspection and monitoring rights over registrants have been explicitly confirmed. The Senate Ag Discussion Draft also provides the CFTC with plenary authority to enact implementing rules regarding core principle regimes for all registrant categories and amends the Commodity Exchange Act's limited private rights of action to include digital commodity exchanges and digital commodities.
Conclusion
As a bipartisan proposal, it comes as no surprise that the Senate Ag Discussion Draft presents a more cautious and prescriptive approach to digital commodity regulation than that found in the relevant sections of the CLARITY Act. The inability of the Agriculture Committee members to come to even a tentative agreement on how to address DeFi activity and the new and significant limitations on the CFTC's exemptive authority suggest that considerable work must still occur to get the Senate Ag Discussion Draft to the point where it can be combined with the corresponding output of the Senate Banking Committee (which itself has not yet released a formal bill for "mark-up"). Nevertheless, the passage of market structure legislation remains a very high priority for the Administration and we have observed how Congress' stablecoin legislation (the GENIUS Act) was able to come together quickly once members were ready to move forward. Market participants should closely monitor further developments as the Senate Agriculture and Banking Committees work toward reconciling their respective approaches.
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